Question 1

In which of the following situations would supply be the most elastic?
A)An auto parts manufacturer is operating at capacity.
B)A real estate developer in Boston is looking to build condos on the waterfront.
C)A furniture manufacturer is operating its factory 8 hours per day.
D)A hotel has all of its rooms booked for each night of the next 3 months.

Accepted Answer

The answer of In which of the following situations would...

Question 2

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15%, then the quantity supplied of cheese will increase by
A)0.4% in the short run and 4.6% in the long run.
B)1.7% in the short run and 0.7% in the long run.
C)9% in the short run and 21% in the long run.
D)25% in the short run and 10.7% in the long run.

Accepted Answer

We can use the formula for percentage change in quantity supplied:
%ΔQs = %ΔP x elasticity of supply

For the short run:
%ΔQs (short run) = 0.15 x 0.6 = 0.09 or 9%

For the long run:
%ΔQs (long run) = 0.15 x 1.4 = 0.21 or 21%

Therefore, the correct answer is C) 9% in the short run and 21% in the long run.

Question 3

Suppose the price elasticity of supply for soccer balls is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for soccer balls causes the price of soccer balls to increase by 20%, then the quantity supplied of soccer balls will increase by about
A)0.67% in the short run and 0.17% in the long run.
B)3% in the short run and 1.2% in the long run.
C)6% in the short run and 24% in the long run.
D)66.7% in the short run and 16.7% in the long run.

Accepted Answer

In the short run, the price elasticity of supply (PES) is 0.3, which means that the quantity supplied of soccer balls will increase by 6% (20% increase in price divided by 0.3) in the short run.

In the long run, the PES is 1.2, which means that the quantity supplied of soccer balls will increase by 24% (20% increase in price divided by 1.2) in the long run.

Therefore, the correct answer is C, 6% in the short run and 24% in the long run.

Question 4

Table 5-10
​
​  ​
-Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most elastic price elasticity of supply?
A)Supply curve X
B)Supply curve Y
C)Supply curve Z
D)There is no difference in the elasticity of the three supply curves.

Accepted Answer

The midpoint method calculates elasticity by averaging the starting and ending prices and quantities. Supply curve X has the most elastic price elasticity of supply because it shows the greatest percentage change in quantity supplied for a given percentage change in price compared to the other curves.

Question 5

Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60, then supply is
A)inelastic, since the price elasticity of supply is equal to .91.
B)inelastic, since the price elasticity of supply is equal to 1.1.
C)elastic, since the price elasticity of supply is equal to 0.91.
D)elastic, since the price elasticity of supply is equal to 1.1.

Accepted Answer

The answer of Holding all other factors constant and using...

Question 6

Table 5-9
​ 
-Refer to Table 5-9. Which of the three supply curves represents the least elastic supply?
A)supply curve A
B)supply curve B
C)supply curve C
D)There is no difference in the elasticity of the three supply curves.

Accepted Answer

Supply curve A represents the least elastic supply, as it has a steeper slope and smaller change in quantity supplied in response to a change in price, compared to supply curves B and C.

Question 7

If the price elasticity of supply for a window manufacturer is 1.5,
A)a 10% increase in the price of windows results in a 15% increase in the quantity of windows supplied.
B)supply is considered to be inelastic.
C)the manufacturer is likely operating very near capacity.
D)All of the above are correct.

Accepted Answer

The price elasticity of supply measures the percentage change in quantity supplied in response to a 1% change in price. A elasticity of supply of 1.5 means that for a 10% increase in price, the quantity supplied will increase by 1.5 times 10%, or 15%. Therefore, choice A is correct. Choice B is incorrect because an elasticity of supply of 1.5 indicates elastic supply, not inelastic supply. Choice C is not necessarily correct or incorrect based on the given information.

Question 8

Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for minivans causes the price of minivans to increase by 5%, then the quantity supplied of minivans will increase by about
A)1.5% in the short run and 6% in the long run.
B)6% in the short run and 1.5% in the long run.
C)16.7% in the short run and 4.2% in the long run.
D)4.2% in the short run and 16.7% in the long run.

Accepted Answer

The answer of Suppose the price elasticity of supply for...

Question 9

At a price of $1.20, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.40, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about
A)0.15
B)0.375
C)2.5
D)2.60

Accepted Answer

Using the midpoint method, we get:

% change in quantity supplied = (150-100)/((150+100)/2) x 100% = 33.33%

% change in price = (1.40-1.20)/((1.40+1.20)/2) x 100% = 16.67%

Price elasticity of supply = % change in quantity supplied / % change in price

= 33.33% / 16.67%

= 2

Therefore, the price elasticity of supply is 2.60, which is closest to answer choice D.

Question 10

Scenario 5-3
Suppose that the supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-3. The price elasticity of supply for aged cheddar cheese could be
A)-1.
B)0.
C)0.5.
D)1.5.

Accepted Answer

The answer of Scenario 5-3
Suppose that the supply of aged...

Question 11

Table 5-9
​ 
-Refer to Table 5-9. Which of the three supply curves represents the most elastic supply?
A)supply curve A
B)supply curve B
C)supply curve C
D)There is no difference in the elasticity of the three supply curves.

Accepted Answer

Supply curve C has the steepest slope, indicating a greater responsiveness to changes in price, and thus a more elastic supply.

Question 12

A manufacturer produces 400 units when the market price is $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about
A)0.45.
B)2.0.
C)2.2.
D)200.

Accepted Answer

Using the midpoint method, we first calculate the percentage change in quantity:

%∆Q = [(600-400)/((600+400)/2)] x 100% = 33.33%

Next, we calculate the percentage change in price:

%∆P = [(12-10)/((12+10)/2)] x 100% = 16.67%

Finally, we can use the formula for price elasticity of supply:

Es = %∆Q / %∆P

Es = 33.33% / 16.67% = 2.0

Therefore, the price elasticity of supply is about 2.2.

Question 13

On a certain supply curve, one point is (quantity supplied = 200, price = $2.00) and another point is (quantity supplied = 250, price = $2.50). Using the midpoint method, the price elasticity of supply is about
A)0.2.
B)0.5.
C)1.0.
D)2.5.

Accepted Answer

The answer of On a certain supply curve, one point...

Question 14

If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is about
A)0.5, and supply is elastic.
B)0.5, and supply is inelastic.
C)2, and supply is inelastic.
D)2, and supply is elastic.

Accepted Answer

The answer of If a 30 percent change in price...

Question 15

At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about
A)0.45
B)0.90
C)1.11
D)2.20

Accepted Answer

The answer of At a price of $1.00, a local...

Question 16

On a certain supply curve, one point is (quantity supplied = 200, price = $4.00) and another point is (quantity supplied = 250, price = $4.50). Using the midpoint method, the price elasticity of supply is about
A)0.22.
B)0.53.
C)1.00.
D)1.89.

Accepted Answer

The answer of On a certain supply curve, one point...

Question 17

Table 5-9
​ 
-Refer to Table 5-9. Along which of the supply curves does quantity supplied move proportionately more than the price?
A)along supply curve B only
B)along supply curves B and C
C)along all three supply curves
D)None. Quantity supplied moves proportionately less than the price along all of the three supply curves.

Accepted Answer

The question refers to elasticity of supply. If quantity supplied moves proportionately less than the price, it indicates inelastic supply. The choice D suggests that all supply curves are inelastic, meaning quantity supplied changes less than the price change.

Question 18

If a 20% change in price results in a 15% change in quantity supplied, then the price elasticity of supply is about
A)1.33, and supply is elastic.
B)1.33, and supply is inelastic.
C)0.75, and supply is elastic.
D)0.75, and supply is inelastic.

Accepted Answer

The answer of If a 20% change in price results...

Question 19

Scenario 5-3
Suppose that the supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-3. The price elasticity of supply for bread could be
A)-1.
B)0.
C)0.5.
D)1.5.

Accepted Answer

Since the supply of bread is elastic, a decrease in demand will lead to a larger decrease in price. The price elasticity of supply can be calculated as the percentage change in quantity supplied divided by the percentage change in price. Therefore, if the price of bread decreases by 10%, and the quantity supplied increases by 15%, the price elasticity of supply would be 1.5.

Question 20

Table 5-10
​
​  ​
-Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most inelastic price elasticity of supply?
A)Supply curve X
B)Supply curve Y
C)Supply curve Z
D)There is no difference in the elasticities of the three supply curves.

Accepted Answer

Supply curve Z has the most inelastic price elasticity of supply because it is the steepest curve, indicating that quantity supplied changes the least with a change in price.

Quiz 5: Elasticity and Its Application

In which of the following situations would supply be the most elastic?

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15%, then the quantity supplied of cheese will increase by

Suppose the price elasticity of supply for soccer balls is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for soccer balls causes the price of soccer balls to increase by 20%, then the quantity supplied of soccer balls will increase by about

Table 5-10 -Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most elastic price elasticity of supply?

Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60, then supply is

Table 5-9 -Refer to Table 5-9. Which of the three supply curves represents the least elastic supply?

If the price elasticity of supply for a window manufacturer is 1.5,

Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for minivans causes the price of minivans to increase by 5%, then the quantity supplied of minivans will increase by about

At a price of $1.20, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.40, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about

Table 5-9 -Refer to Table 5-9. Which of the three supply curves represents the most elastic supply?

A manufacturer produces 400 units when the market price is $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

On a certain supply curve, one point is (quantity supplied = 200, price = $2.00) and another point is (quantity supplied = 250, price = $2.50) . Using the midpoint method, the price elasticity of supply is about

If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is about

At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about

On a certain supply curve, one point is (quantity supplied = 200, price = $4.00) and another point is (quantity supplied = 250, price = $4.50) . Using the midpoint method, the price elasticity of supply is about

Table 5-9 -Refer to Table 5-9. Along which of the supply curves does quantity supplied move proportionately more than the price?

If a 20% change in price results in a 15% change in quantity supplied, then the price elasticity of supply is about

Table 5-10 -Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most inelastic price elasticity of supply?